Pakistan's electricity consumers continue to bear the financial burden of capacity payments made to Independent Power Producers (IPPs), with newly released figures showing that these payments remain a key factor behind the country's high electricity tariffs.

According to the latest data, billions of rupees have been paid to power producers over the past five years, making IPP-related payments one of the largest components of electricity costs.

The figures indicate that a considerable share of every electricity bill collected from consumers is used to meet obligations to Independent Power Producers. While around 30 percent of a consumer's bill covers the actual cost of electricity and taxes, nearly 70 percent of the per-unit charge is linked to payments made to IPPs, significantly contributing to expensive electricity bills.

Rs13.397 trillion paid over five years

Data shows that Pakistan paid approximately Rs13.397 trillion to Independent Power Producers during the last five years. Of this total, around Rs7.275 trillion was paid to private power plants for electricity generation.

The figures further reveal that a substantial portion of consumer payments went towards power plants that did not generate electricity. These payments, known as capacity payments, are made under long-term contractual agreements to ensure generation capacity remains available, regardless of actual electricity production.

Capacity payments continue to rise

Despite a steady decline in electricity generation costs, capacity payments have continued to increase, placing additional strain on Pakistan's power sector.

The rising cost of these contractual obligations has been a major factor behind increasing electricity tariffs, affecting households, commercial users and industries nationwide.

Pressure on consumers and public finances

The report notes that the impact of capacity payments extends beyond electricity consumers, placing additional pressure on the national exchequer. The growing financial obligations associated with these payments remain one of the key challenges facing Pakistan's energy sector, with far-reaching implications for public finances and the overall cost of electricity.